US economic data results in Dollar surge
It was expected that the Dollar would weaken slightly owing to Thanksgiving. Surprisingly, the US dollar value continued to increase reaching almost 14 year high. It even surpassed the high against Euro during April 2015. It has also reached an 8 month high against Yen. In general, Dollar continues to strengthen against a whole basket of international currencies. The US markets, however, closed on Thursday owing to Thanksgiving holiday.
The trade was expected to be poor due to Thanksgiving holiday, but the early trade in Europe showed positive results for the Dollar. On Wednesday, US economic data was released and it has resulted in the surge of its value. As per the data, new orders for the manufactured capital goods increased as the demand for equipment and machinery also increased. The consumer sentiment was also positive this month.
Apart from recording highs against Yen and other international currencies, the dollar also reached record highs against Rupee, Lira, and Yuan. The Japanese, European and Chinese policymakers are now focused on weakening their currencies to provide room for economic growth. The market expects the Trump administration to boost inflation by increasing interest rates. This will bring substantial capital to the US. The market is now entirely driven by this expectation.
Economists in Tokyo suggested that the Fed will make two to three interest rate rises in 2017 and thus encourage the weakening of yen throughout the year.
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